A Steindlian Model of Income Distribution, Economic Growth, and Stagnation

Abstract

In line with the classical and post-Keynesian/Kaleckian tradition, in his original demand-side stagnation theory Josef Steindl focused on the functional distribution of income. In this chapter, Steindl’s twentieth-century theoretical model is adjusted to also include the personal distribution of income. The extended model includes both the profit share and a measure of the personal distribution of income. Based on a comparative static analysis, it is shown that economic shocks which lead to an increase in the unequal distribution of personal income and/or a rise in the profit share can be accompanied by a slowdown in long-term economic growth. Moreover, it is pointed out that changes in the long-term rate of economic growth feed back on both the personal and functional distribution of income.